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Friday, 11 March 2011

A worrying development?

The Ukrainian government has been talking about installing a state run grain monopoly which many considered to be a bit of smoke and mirrors.

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Well it seems the government is more serious about it than most of us thought and have started to implement legal changes that may well make the spectre of a Ukrainian grain board a reality.

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My mate CuckPenner of LeftField Commodity Research tells me that when he researched the Canadian Wheat Board he found that it left Canadian farmers some $400-600 million worse off each year mostly due to inefficiencies and a lack of competitive bidding.

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Is the UWB likely to be any more efficient than the CWB?

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The EBRD and World Bank have been financing some spectacularly expensive grain storage and handling facilities with private trading companies.

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I can't see them financing a state run monopoly so who is going to pay to upgrade the sorely needed storage?

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Two years in the last three saw grain export bans; ships full of wheat sat at port through most of August and September last year; a poor 2010 harvest coupled with low prices made it difficult to make a return on investment; murky land ownership procedures; difficulties in sourcing reliable inputs; corruption; theft etc.

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You can see why private investment is not rushing headlong in to Ukraine agriculture; the introduction of a UWB is unlikely to boost confidence and encourage further investment now is it.

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So what is anybody doing about this?

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The EBRD, World Bank and IMF held a round table discussion and have written a stern letter to the Prime Minister of Ukraine!